Bitcoin Erases Three-Week Rally, Retreating to Year-End Levels

Bitcoin has surrendered its 2026 gains, falling approximately 4% in the past 24 hours to around $88,850 as of Wednesday morning Asia time.

The price now sits almost exactly where it closed in 2025, erasing a three-week rally that had briefly pushed the cryptocurrency above $97,000. At the time of writing, the token is attempting to rebound after touching a session low of $87,901.

A Disappointing Year-End for 2025

Bitcoin closed 2025 at approximately $87,000-$88,000, down about 30% from its October all-time high of $126,000 and posting a roughly 6% annual loss. December proved particularly brutal, with the cryptocurrency falling about 22% for its worst monthly performance since December 2018.

The much-anticipated “Santa rally” never materialized. Thin holiday liquidity and a lack of fresh catalysts left the market drifting into the final session of the year. The repeated attempts to reclaim key resistance levels were met with selling pressure.

New Year Rebound: Inflation Relief and Regulatory Hopes

Sentiment shifted dramatically in early 2026. On January 14, the Bureau of Labor Statistics released an inflation report showing prices stabilizing, prompting Bitcoin to surge more than 4% over 24 hours and break above $97,000, levels not seen since mid-November.

Breaking above the $95,000 level, a zone that carries both technical and psychological significance, suggested further upside potential. Optimism around the Clarity Act, which would establish a broad regulatory framework for digital assets, also supported sentiment. However, the Senate postponed its planned markup of the bill to the last week of January, signaling it had not yet secured the necessary votes.

Geopolitical Risk Returns

On January 21, President Donald Trump’s push to acquire Greenland and threats of new tariffs on European allies sent shockwaves through global markets. US benchmark stock indexes sank more than 2%, the VIX touched its highest level since November, and the dollar slid against most major currencies.

Shiyan Cao at hedge fund Winshore Capital told Bloomberg the situation “opened up a tail risk—that people don’t want US assets,” adding that investors must now price in a political risk premium.

The selloff echoed fears from April 2025, when Trump’s sweeping tariff announcement triggered a deep slump in US markets and a massive spike in volatility.

Outlook: Volatility Here to Stay

Bitcoin has now completed a round trip, erasing its year-to-date gains and returning to 2025 closing levels. Additional volatility looms on Wednesday as the Supreme Court hears arguments over Trump’s bid to fire Federal Reserve Governor Lisa Cook.

A deal may eventually defuse the Greenland tension, but it could take months—leaving markets facing heightened volatility in the interim.

For now, the cryptocurrency appears to be stabilizing above $88,000 as traders assess whether this represents a buying opportunity or the start of a deeper correction.